Category: Featured

[vc_row][vc_column][vc_column_text]MTAA CEO Ian Burgess said this announcement confirmed that insurer claims that medical device prices would force them to raise premiums over 3.5 per cent – twice inflation – next year were nothing but a “sham and a scam”.

“No matter how you spin it, this is an embarrassing capitulation for Australia’s ‘Big 3’ corporate insurers,” he said. “Minister Hunt has not only stood firm and called their bluff, but also forced the ‘Big 3’ – Bupa, Medibank and NIB – to admit that they can afford to dip into their pockets and profits to lower their prices.

“The ‘Big 3’ insurers must therefore be forced to submit price cuts below zero per cent the next few premium rounds to ensure no more Australians are priced out of their health fund while the Minister undertakes further reform.

“Over the past decade we saw private health premiums increase at a faster rate than national house prices – as a country we can’t afford to allow the ‘Big 3’ corporate insurers to get away with that again.

“It’s time to save private health from itself.” Minister Hunt’s decision comes on the back of recent evidenced-based campaigning from MTAA to ensure he could deliver on his promise to bring premium increases in under 3 per cent next year, including analysis showing:

• Private health insurers have not paid one extra cent for medical devices over the past two premium years, despite raising their prices twice-inflation and banking over $1 billion in profits between them.
• Private health premiums had grown at a faster rate than national house prices over the past decade, leaving customers out of pocket as much as $4000 over 10 years.
• The avg price of medical devices in Australia fell 12 per cent over the same 10-year period.
• Three quarters of Australians wanted Minister Hunt to force health funds to keep their price increases under 3 per cent next year, and use their $1 billion in profits to fund it (YouGov poll of over 1000 Australians).
• Two thirds of Australians did not believe a premium increase over 3 per cent next year was in the “public interest” – the key test allowing the Minister to push back on private health insurer price increase requests.
• The MTAA’s Agreement with the Minister has already saved insurers a total of $390 million off the cost of medical devices and is on track to exceed the $1.1 billion in total expected savings.
• A further $1 billion worth of efficiencies that could reduce private health prices by up to 20 per cent within 3 years if adopted now (AlphaBeta Report – August 2019).

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[vc_row][vc_column][vc_column_text]And there’s more bad news coming for consumers in 2020, with premiums set to rise another $350 next year if the ‘Big 3’ health funds refuse Health Minister Greg Hunt’s request to drop price increases below 3 per cent next year.

New analysis from the Medical Technology Association of Australia – released this week – shows private health premiums rose an average of 71 per cent nationally between 2009 and 2019 – compared to an average 49 per cent increase in average national capital city house prices.

In contrast, medical devices prices fell an average of 12 per cent over the same period – demonstrating the success of Minister Hunt’s agreement with MTAA to increase affordable access to patients.

MTAA CEO Ian Burgess said the data showed just how “out of touch” the ‘Big 3’ private health insurers were and renewed calls for the Morrison Government to reject any premium increases above 3 per cent next year.

Mr Burgess said the ‘Big 3’ corporate health funds should also be subject to different rules to smaller community health funds, given they were sitting on 90 per cent of the sector’s $1 billion in profits.

“Every day for the past decade we’ve heard about housing price hikes pressuring family budgets and locking young people out of the market altogether – and it turns out private health insurers are even worse,” Mr Burgess said.

“Private health insurance prices are through the roof, and instead of dropping prices, the ‘Big 3’ health insurers have deliberately chosen to drop customers instead and force government to keep bailing them out.

“The number one priority for the government should be intervening to stop Medibank, Bupa and NIB continuing to price their customers out of the market, because once they’re gone, current tax penalties mean it’ll be an uphill battle to get them back.

“The first step is for Minister Hunt to not only follow through on his promise to reject any premium increases over 3 per cent, but force insurers to pay for any price cuts out of their own pockets, not everyone else’s.”

Mr Burgess said the ‘Big 3’ private health insurers had not paid one extra cent for medical devices over the past two premium years, despite raising their prices twice-inflation and banking over $1 billion in profits between them.

A YouGov poll – released last week – found three quarters of Australians want Minister Hunt to force health funds to keep their price increases under 3 per cent next year, and use their $1 billion in profits to fund it.

The MTAA’s Agreement with the Government has already saved insurers a total of $390 million off the cost of medical devices and is on track to exceed the $1.1 billion in total expected savings.

A recent AlphaBeta report – released in August 2019 – also recommended a further $1 billion worth of efficiencies that could reduce private health prices by up to 20 per cent within 3 years if adopted now.

Key Findings:

1. A family with top cover policy with no excess costing $10,000 in 2019 was paying $5859 in 2009 – an extra $4141.
2. A family with top cover policy with excess costing $7500 in 2019 was paying $4394 in 2009 – an extra $3106.
3. A couple with mid-cover policy costing $5000 in 2019 was paying $2930 in 2009 – an extra $2070.
4. A single with a basic cover policy costing $1500 in 2019 was paying $879 in 2009 – an extra $621.
5. The ‘Big 3’ corporate health funds’ prices – NIB (78%), Medibank (72%) and Bupa (68%) – all grew at a faster rate than the average ABS capital city residential house price index (49%) between 2009 and 2019.
6. The avg price of medical devices in Australia fell from $775 in 2009 to $680 in 2019 – a decrease of $95 (-12%).
7. Recent reports that insurers will increase premiums a further 3.5% in 2020 means a family with a top cover policy will be out of pocket another $350, along with $175 for couples and $52 for singles.

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[vc_row][vc_column][vc_column_text]Analysis of official APRA data confirms the overall cost of medical devices to private health insurers has gone backwards over the past two premium years.

Medical Technology Association of Australia CEO Ian Burgess said this demonstrated the success of its landmark agreement with the Federal Government, which had delivered health funds price cuts to thousands of implants like heart pacemakers, knees, hips and eye lenses since 2016.

However, despite these hundreds of millions of dollars in savings, Mr Burgess said the ‘Big 3’ corporate health insurers – Medibank, Bupa and NIB – had all continued to raise their premiums at twice the rate of inflation over the same period, while recording profits of nearly $1 billion between them.

“Insurers have not paid one extra cent for medical device claims by their customers over the past two premium years,” Mr Burgess said.

“These findings prove the Federal Government’s agreement has successfully delivered more Australians more access to more medical devices at less cost to insurers – and premiums should be going down, not up.

“Any attempt by insurers to claim premiums should rise by over 3 per cent next year – twice the rate of inflation – is a sham and a scam.

“It’s in the public interest for APRA to ensure the ‘Big 3’ health insurers pass on every cent of these medical devices savings to their customers through lower premiums as promised – and throw every book available at them if they don’t.”

Mr Burgess said the APRA data also confirmed insurer criticisms about increases in the number of people claiming medical devices (volumes) were just a “deliberate distraction” from their planned premium hikes.

“Private health funds have run an orchestrated misinformation campaign misleading their customers, investors and government on medical device costs and casting doubt on the integrity of the dedicated healthcare professionals that use them,” Mr Burgess said.

“Unless APRA draws a line in the sand now, health insurers will be a given the green light to walk all over their customers, suppliers and taxpayers for another decade.”

APRA’s official data shows the total cost of medical devices paid by health insurers fell from $2,090,886,035 in the 2016 Premium Year (pre price cuts) to $2,077,873,733 in the 2018 Premium Year (post price cuts).

Even more significant is the fact growth in total medical device costs paid by insurers fell from 13% in the two premium years pre price cuts (2014-2016) to -1% in the two premium years post price cuts (2016-2018).

Today’s findings come after recent analysis in August 2019 revealed MTAA’s Agreement with the Government has already saved insurers $314 million and was on track to exceed the $1.1 billion in total expected savings.

An AlphaBeta report – also released in August 2019 – uncovered nearly $1 billion in additional savings in the health system outside of medical devices that, if passed on by insurers, could help reduce private health premium growth by up to 20 per cent by FY2022.

Federal legislation requires insurers to submit their premium increases in November each year for scrutiny by the Australian Prudential Regulation Authority (APRA).

The same legislation also gives the government power to reject private health insurer premium increases that are not in the “public interest”.[/vc_column_text][vc_separator][vc_column_text]

Table 1: Total Medical Device Costs to insurers pre and post medical device price cuts

 Source: APRA Operations of Private Health Insurers Annual Report 2018-19 Source: Department of Health (insurer premiums 2015 – 2019)[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]Reforms to medical device pricing were implemented as part of the Agreement between MTAA and the Government in October 2017.

Health Minister Greg Hunt told the Australian Financial Review today that:

We have reduced the cost of prostheses to patients and private health insurers by up to 20 per cent for some classes of medical devices…These cost reductions have helped to keep the average premium changes in 2019 to the lowest level in 18 years.

 Under the government’s agreement with the MTAA, price reductions were applied to medical devices listed on the Prostheses List in 2018 and again in 2019. An additional round of cost reductions will apply from 1 February 2020 to continue to reduce costs to private health insurers and patients.[1]

“The devices industry was the sole contributor to lower private health insurance premium increases both in 2017 and in 2018,” said MTAA CEO Ian Burgess today.

“MTAA’s Agreement with the Government is on track to exceed $1.1 billion in expected savings.

“Medical devices make up less than 10 per cent of private health insurance benefits, yet the insurers continue to spread misinformation around the causes of higher than expected premium increases.

“Access to modern life-saving technology through the Prostheses List is a key part of the value proposition of private health insurance.

“Patient and clinician choice is a key part of the value proposition of private health insurance, one that risks being eroded by the false claims made by insurers about the cost of devices.

“The medical technology industry believes access to a full range of medical technology is one of the key benefits of having private health insurance and we’re committed to helping ensure all Australians lead healthier and more productive lives,” Mr Burgess concluded.

[1] https://www.afr.com/companies/healthcare-and-fitness/government-rejects-claims-prosthetic-reforms-have-failed-20191107-p538an

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“…insurers’ lack of preparedness to deal with growing risks, including declining affordability, a shrinking and ageing membership base, and changes in government policy.

The review found that while insurers were well aware of the risks, very few had credible strategies to mitigate their impact on sustainability. APRA observed a heavy reliance on lobbying politicians and other industry stakeholders due to a concerning assumption by many insurers that Government would provide solutions.

“…that’s not an excuse for doing nothing and hoping the Government will fix everything.”[1]

Now, as the next round of premium increases draws closer, the insurers have chosen to deliberately mislead the public about the causes of premium growth, as they continue to devalue their own product through the suggestion that the listing of new and innovative technologies is somehow a negative.

“What we are seeing is an increasingly desperate attempt by the private health insurance industry to rein in their costs and maintain their profitability by pointing the finger at everyone else,” said Ian Burgess, CEO of the Medical Technology Association of Australia (MTAA) today.

“Medical devices make up less than 10 per cent of private insurance benefits.

“The devices industry was the sole contributor to lower private health insurance premium increases both in 2017 and in 2018. MTAA’s Agreement with the Government is on track to exceed $1.1 billion in expected savings.

“The claim that the listing of new, innovative and more clinically effective technologies is somehow a negative, is completely absurd and demonstrates that the insurers have lost focus on patients,” Mr Burgess said.

Meanwhile, insurer profits continue to increase, with NIB reporting a 9.2 per cent increase in annual profit recently to $201.8 million, with a share price increase of 31 per cent over the past six months, and Medibank Private’s share price up 16 per cent.

The recently released AlphaBeta report, Keeping Premiums Low: Towards a more sustainable private healthcare system, found that insurers have collected 50% more profit from each of their members over the past five years, far outpacing the 21% growth in benefits paid out.

It also found that private health funds have not extracted sufficient economies of scale in the wake of significant revenue growth and many funds are well above the industry average of 9% in operational expenditure, this includes an estimated marketing spend of $400 million.

“After tax profits for insurers are up 15% over the past three years as affordability for ordinary Australian families goes down,” Mr Burgess said.

“Patient and clinician choice is a key part of the value proposition of private health insurance, one that risks being eroded by the false claims made by insurers about the cost of devices,” said Mr Burgess.

“The medical technology industry believes access to a full range of medical technology is one of the key benefits of having private health insurance and we’re committed to helping ensure all Australians lead healthier and more productive lives,” Mr Burgess concluded.

[1] https://www.apra.gov.au/news-and-publications/apra-calls-out-private-health-insurers-over-inaction-to-address-financial

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[vc_row][vc_column][vc_column_text]The private health insurance lobby’s call comes as one of its member companies recently called for the government to fully privatise Medicare.

Private Healthcare Australia (PHA) said the Australia Government could, working alongside health funds, help halt and reverse the trend of declining young adult participation by introducing a Fringe Benefits Tax exemption application to private health insurance premiums for employees under the age of 40.

PHA’s Chief Executive, Dr Rachel David, called the propose “modest” and said it “would put the private health insurance industry within reach of young people who will benefit from healthcare services not readily available to them in the public sector”.

CHOICE’s Senior Campaigns and Policy Advisor, Dean Price, challenged PHA Americanisation proposal asserting that “people need to be at the centre of the debate about their health.”

“Many people find health insurance expensive and to hold little value. Out-of-pocket costs are rising, and health insurers are paying out less per hospital visit,” Mr Price said.

The Doctors Reform Society (DRF) President, Dr Tim Woodruff also slammed the proposal question why private health insurers wanted these changes.

“To get more taxpayer support for themselves to make more profits. The majority of Australians don’t have private health insurance because it’s a bad product,” Dr Woodruff said.

Federal Shadow Health Minister, Chris Bowen, said the suggestion was another unrealistic proposal for more subsidy at a cost to the taxpayer.

“The private health insurance sector seeking further government subsidy as reform for the industry is increasingly untenable,” Mr Bowen said.[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]As reported in the media recently, private health insurers have seized on the June 2019 APRA Prostheses List (PL) data to claim that volume growth is excessive and savings under the MTAA-Government Agreement have not been realised.

The claims made by private health insurers are false. These are the facts:

• Savings on the PL in the premium year 2018 were $224 million, $35 million more than forecast under the Agreement
• Volume growth of 8.6% to June 2019 is not significantly different from the compound annual growth rate of 7.8% over the last 10 years
• Average benefits have dropped 16% since Quarter 4 2016 from $794 to $665, and is expected to fall further with more cuts to come in 2020.

“The medical devices industry has made the only direct contribution to keeping the cost of private health insurance down, delivering the lowest premium increase in 18 years,” said Ian Burgess, MTAA CEO.

“The cost reductions are a direct result of the $1.1 billion dollars in cuts delivered by MTAA through the Agreement and demonstrate MTAA’s active contribution to the affordability of healthcare in Australia,” Mr Burgess said.

Meanwhile, insurer profits continue to increase, with NIB recently reporting a 9.2 per cent increase in annual profit to $201.8 million, with a share price increase of 31 per cent over the past six months, and Medibank Private’s share price up 16 per cent.

“Insurers are once again misrepresenting the savings delivered to them under the Agreement in order to avoid a reduction in their considerable profit margins,” said Mr Burgess.

MTAA commissioned the AlphaBeta report to constructively identify areas for savings to keep private health insurance sustainable.[/vc_column_text][/vc_column][/vc_row]